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Recently I was reading things on the European debt crisis. It seems to me that when there is a financial crisis, strong economies in EU, like Germany and France, are supposed to help the countries in trouble, like Greece, out of the crisis, with debt or whatever. But this seems to be an economic burden for them being part of EU.

I wonder what the benefits for strong economies like Germany and France are, for being members of the European Union. Please note that my question focuses on the positive side for them to stay in EU, namely I am not really asking what political troubles Germany and France will get into for leaving EU.

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    Germany and France did not help Greece out of the crisis. They helped their own banks, to which Greece owed money.
    – gerrit
    Apr 8 at 7:18
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    Since when an economy, be it strong or weak, suffers from improved trade with wider markets?
    – fraxinus
    Apr 8 at 10:23
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    Life is not a zero sum game. Not even economics... Apr 8 at 17:31
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    @gerrit, see: nytimes.com/2022/04/07/opinion/…, which is Paul Krugman's take on Germany and Greece and how selfishness can fail in the long term.
    – Buffy
    Apr 8 at 19:21
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    With the same reasoning one could ask why certain parts of the US stay in the US, and so on. By the way EU or it's predecessor EEC were founded to promote peace. Unfortunately this question seems to know nothing about that history.
    – Trilarion
    Apr 9 at 8:26

9 Answers 9

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The main one is exporting without barriers to these other EU countries, in terms of [no] tariffs and [no] non-tariff barriers (thanks to unified product standards), and also lack of competitive currency devaluation from these countries (due to the euro).

And of course, you get cheap vacations and even retirement abroad, so it's not like piling up euros is pointless.

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    Access to cheap labor and supplies also. An euro worth of labor goes a looong way in the right country. Apr 8 at 6:03
  • How does the euro facilitate cheap labor? An euro is worth an hour of an unskilled worker in Argentina, yet we don't use it directly, we exchange it to the local currency and use that to buy food.
    – Blueriver
    Apr 8 at 16:27
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    Poland is in the EU and has a GDP per capita of less than a third of Germany's. Even if they aren't in the Eurozone, they still can be hired. Even in the Eurozone, Latvia has a GDP per capita of less than a half of Germany's.
    – prosfilaes
    Apr 8 at 17:44
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    @Blueriver The Euro per se might not provide access to cheap labor but being a member of the EU means that it is much easier to relocate or outsource part of your supply chain elsewhere in the EU. That's the cheap labor we are talking about.
    – Relaxed
    Apr 10 at 15:41
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You have to remember that the EU's immediate precursor was initially specifically set up to ensure that France and Germany would not enter into another war against each other.

Also, even a strong economy like Germany has its economic voice much amplified by negotiating on the world stage as a member of the EU trade bloc. As Fizz noted, a unified 447M+ market handily beats a national market.

The Greek debt crisis is also less black and white than seems at first glance. While there were no doubt calls to noble ideals like European unity motivating assistance, it is also true that both German and French bankers had hefty exposures to risky loans to Greece.

So, rather than just the French and German taxpayers bailing out Greece out of kindness you could also say that French and German banks roped European taxpayers in general to rescue them for their unduly greedy and risk-unaware lending decisions (Greek government bonds at some point had only 0.25% extra interest compared to German debt).

The bailout was also driven not just by Greece being an EU country, but an Euro-using one. There was concern on the impact on the Euro which would have hurt the France and Germany. For Germany and more so France, using an EU-wide currency has certain advantages on the world stage over a national currency.

But, yes, there ought to be a little more pushback against fixing problems that member states deliberately get themselves into. Countries like the Netherlands, and previously the UK, are usually more vocal in putting dampers on picking up tabs. Germany sometimes feels guilty about doing so out of historical reasons, something Greek politicians made no bones about exploiting when criticizing Germany.

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    (+1) presumably you mean the ECSC in your first sentence
    – AakashM
    Apr 8 at 12:57
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    The first paragraph is a key point, and applies a bit more broadly: A major founding aim of the EU was to foster long-term regional peace and prosperity throughout Europe. Helping your neighbours may cost you in the short-term, but in the long term, if it improves regional prosperity and stability, it can more than pay back its cost. It’s of course still reasonable to debate how much such bailing-out is worthwhile in a given situation — but the point is that it’s worth considering long-term effects, not just short-term ones. Apr 8 at 17:52
  • @AakashM correct, but the ECSC is a bit more obscure. adding a link to it. Apr 9 at 0:35
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    "...a unified 300M+ market..."You are technically correct, but (for the record) the actual figure is more like about 450M (european-union.europa.eu/principles-countries-history/…), which is quite a few more than 300M! Apr 9 at 14:33
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It seems to me that when there is a financial crisis, strong economies in EU, like Germany and France, are supposed to help the countries in trouble [...]

That's just the bone of contention. Germany and some others with a high GDP-to-population ratio insist that bailouts are not required. They want

  • a strong union (even Germany or France cannot face down the US or China alone),
  • a large internal market,
  • to avoid the short-term effects of an overly strong currency, and
  • on the long run they want the other members to get stronger,

but they don't want to pay for other countries' debts. This puts the strong economies in a quandary, they promised no bailouts, yet without bailouts the Eurozone and the EU breaks down. So the finance ministers decided that markets would not get away with betting against any one Eurozone country, whatever it takes.

The UK thought so even more strongly, one of the causes of Brexit. It looks as if Germany will grudgingly pay bailouts rather than see the Eurozone fall, but not gladly.

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    Even with "no bailouts" the EU is regularly providing funding for the less well-off regions; the so-called Cohesion Policy ec.europa.eu/regional_policy/en/policy/how/is-my-region-covered
    – Fizz
    Apr 7 at 18:39
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    @Fizz, the OP asked for payments in crisis.
    – o.m.
    Apr 8 at 4:33
  • +1 These are exactly the points that I would make, especially weaker currency and free market within EU. Perhaps, it could be worth mentioning that EU has evolved from a purely economic union of the strongest European economies to a more political one. Apr 8 at 7:23
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One thing that must not be forgotten is that the European Union is not only an economic union. If you are a citizen of a member state, your EU citizenship grants you a number of rights while residing in every other member state that non-EU citizens don't receive automatically.

These rights include the freedom to move, reside, and work in any member state, voting rights in regional elections, access to the national health and social security services, numerous consumer rights (the regulations concerning access to mobile phone networks is one that I personally appreciate: EU citizens can use their mobile devices at the same rates and prices in any member state as if they were in their country of origin), and a guarantee that you will be treated equally in all legal matters as if you were a citizen of the other member state. EU citizenship is in effect even outside of the Union: you will receive consular protection from any member state if you stay in a country in which your home nation doesn't have an embassy or consulate.

In short, being a member of the European Union has advantages that don't affect the economy directly. Citizens of member states with strong economies such as Germany and France benefit from these rights, and many citizens of Germany and France would disapprove of being bereft of these rights in other European countries.

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It makes sense for stronger economies to support the weaker ones and to help them develop.

As the weaker economies grow, the value of trade between them and the stronger economies increases. You can think of the flow of money from richer EU countries as an investment rather than simply aid for poorer countries.

Economics at the national level is not a zero-sum game. When one country does well it does not have to come at the expense of other countries.

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During the 1990s Germany made France agree to the German reunification on a proposal that France will enjoy a larger role or more power in the EU if they agree on the German reunification.

Also, take a look at the following table:

enter image description here

Germany and France are the two most populous countries in the EU. As a result, they enjoy more power over decisions related to the EU.

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  • The last column of the table shows they Germany and France have less influence?
    – A.L
    Apr 9 at 16:23
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The EU provides a large, relatively unified market place and access to similarly large pool of labour.

Goods and services can be produced anywhere in the EU where it is the cheapest.

People can follow the jobs.

The size of the bloc makes it more effective at negotiating with others on the world stage.

States with strong economies in the EU (at least theoretically) benefit from this because they have more big businesses that are capable of exploiting these advantages of scale.

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    That any products in the EU can be produced where it cheapest is not true there are many products that can be legally produced only in the specific locale where the specific cultural designation allows. Some of these designation are sore points. Just ask a Danish dairy farmer if he thinks Denmark produces feta cheese as an example.
    – Neil Meyer
    Apr 8 at 20:32
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    Appears wise, not to address the nature of the debt crisis. Apr 8 at 22:52
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    @NeilMeyer: The case before the EU courts between Denmark and Greece is not about whether Danish diary farmers may produce that particular type of cheese. It's about abuse of a "Protected Designation of Origin": In the EU, regions can apply for protection for food names that have strong regional associations. So, in short, Danish diary farmers may produce a Greek-style cheese from sheep's milk, but they may not pretend it's the real thing by selling it as "feta". They'll have to use the label "Greek-style cheese" instead.
    – Schmuddi
    Apr 9 at 6:35
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Although this may just be speculation on my part. I always thought that the creation of the EU was to ensure that an economic sanctions used as penance for military action could hopefully not give rise to the creation of a fascist government again. A lot of early success of the national socialists was born out of the intense disenfranchisement the German people felt at the economic sanctions used against them in regards to the treaty of Versailles. Maybe if everybody in Europe is equally rich or at least equally not poverty stricken then this part of history could be kept from repeating

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  • leads to the question: "How to prevent the EU?" and Britain's answer. No, the EU has really bad credentials in the scope of social stability :( Aug 11 at 6:32
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Historically the European Union is a peace project, ending centuries of economic and open war between France and Germany. These countries have formed the center of the EU and by this reached the economic stability you refer to. After Britain left the EU, their role is even more carrying.

The financial system, established with the EURO seems to be a totally separate one, and it is not working for unity, as countries with historically less GDP have lost their POWER to adjust inflation of their own currency, which appears to me as system change and not just an accidental crisis, as we always had them, and Germany or France pumping money into them, won't change this.

Your question breaks down to: What are the benefits of the EURO for European tax payers. Summing up former answers: Very little.

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    This is just... not an answer. It doesn't answer the question, as far as I can tell. It doesn't tell us what Germany and France gain from the EU.
    – user253751
    Apr 8 at 12:47

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